WELLINGTON (AFP) - Sir Ian McKellen will return in the role of Gandalf for two big-budget movies based on the JRR Tolkien book "The Hobbit," the films' director Guillermo del Toro confirmed Sunday.

Both movies would be filmed entirely in New Zealand, where the Oscar-winning Tolkien "Lord of the Rings" trilogy was shot.

Mexican film-maker del Toro and the Hobbit films' executive producer Peter Jackson released details of the latest project during an hour-long live Internet chat with fans.

Del Toro said "Lord of The Rings" stars McKellen and Andy Serkis (Gollum) would return for the Hobbit films but actors for new characters were not yet decided.

Jackson said Hobbiton would be rebuilt "bigger and even better than it was" in the "Lord of the Rings."

"It is unlikely we will need any locations outside of New Zealand which has always been the perfect Middle Earth," Jackson said.

"There is nothing yet that Tolkien has described that we haven't managed to find in this amazing little country and I expect 'The Hobbit' to be no different."

Del Toro was confirmed as director last month after the project was given the go-ahead when Jackson and Hollywood studio New Line ended a lengthy quarrel over dividends from the "Lord of the Rings" series.

The trilogy brought in nearly three billion dollars in global box office takings, not counting DVD sales, and the movies between them won 17 Oscars.

In 2004, the final installment "The Return of the King" was awarded the best picture Oscar, the first time ever that a fantasy film won the award.

"The Hobbit" is set in Middle Earth and is a prelude to the "Lord of the Rings" trilogy.

The book tells the story of how the hobbit Bilbo Baggins sets off on a quest accompanied by 13 dwarves and Gandalf the wizard to confront a dragon.

Pre-production work on the films will begin in 2009 and the films will be shot back-to-back, beginning in 2010. "The Hobbit" is set to be released in December 2011 and the second as yet untitled film in December 2012.

I have to say that upon reading this, I am relieved, at least in part. Earlier articles last year were saying Jackson was off the movie, and here I was thinking, ah shit, that's it. They're going to let one or two suits' pride fuck up a great movie. I figured it came down an exec playing 'my tool is bigger than yours', or more properly translated as 'I'm the biggest tool of all'. This particular tool being Robert Shaye.

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Jackson's involvement in the making of a film version of The Hobbit, along with another possible The Lord of the Rings prequel, has a long and chequered history. In November 2006, a letter from Peter Jackson and Fran Walsh stated that due to an ongoing legal dispute between Wingnut Films (Jackson's production company) and New Line Cinema, Jackson would likely not be directing the film. However, in response, MGM spokesman Jeff Pryor stated that "we still believe this matter of Peter Jackson directing The Hobbit is far from closed." ( MGM owns the distribution rights to The Hobbit film). New Line Cinema's head, Robert Shaye said that Jackson "will never make any movie with New Line Cinema again while I'm still working for the company." An online boycott of New Line Cinema was begun in the hopes of compelling New Line Cinema to renegotiate with Peter Jackson.

Shaye's comments marked the first time a New Line executive had commented publicly on the franchise since Jackson announced that he was pulled out of the project. In August 2007 though Shaye was trying to repair his working relationship with Jackson. "I really respect and admire Peter and would love for him to be creatively involved in some way in The Hobbit," Shaye said." On December 18, 2007, it was announced that Peter Jackson and New Line Cinema had reached agreement to make two prequels, one based on The Hobbit which will be released in 2011 and 2012. Jackson will serve as a writer and executive producer. Guillermo del Toro has been selected to direct.

At least this idiot was man enough to bite the bullet and realize he needs Jackson. Doesn't matter who paid and licensed LoTR, Jackson MADE those films, in every sense.

Now Guillermo del Toro is credited with Hellboy and the Blade films. The glaring weakness here is that the Blade films sucked. I watched one of them; was so bad I had to turn it off after 20 minutes or so, and never went back. Yes, I believe they're that bad. I'm not convinced at all that this guy needs to be touching a fantasy epic.

Now of course this doesn't mean Guillermo del Toro can't do Tolkien at all, but he's unproven here. Whereas Jackson is proven. The first night I went to see Fellowship of the Ring at the show, the thing that really got me was how Jackson struck such a wonderful artistic compromise. Over the years I've seen all the art based on the characters and settings. I've seen two animated approach styles to the books.

What's more important perhaps than anything is Tolkien's well-known profuse and illustrative style as an author. Rarely does even a fantasy author give us such an elaborate mental construct when going through their work. And trying to find some sort of common ground between that illustrative prose and all the artists' styles over the decades, Jackson found a tremendous artistic compromise.

Seeing these movies for the first time was, for me, a tremendous gift of deja vu, for lack of a better term. I'd read the Hobbit and LoTR multiple times, long before the movies. And it was more than going along with the movies and knowing what would happen; I went along with a tingling sense of familiarity. The Shire, the wild lands about Bree, Rivendale, Moria, the Balrog, Minas Tirith, Fangorn, the Nazgul, Mordor.... I had walked those places and seen those things with those heroes many times, curled up in a chair at night. I knew them by heart, and seeing them on the silver screen with such familiarity was a tremendous gift Jackson gave us. I'd not experienced that before in a movie...not on that level.

This is why I'm firmly in Jackson's camp on this. I was quite prepared to boycott this as well if he was not onboard. If you want to make a Spiderman film, you don't grab some shmuck director out of a lineup to do it. "Well, I know he wears a suit and shoots webs..." Jackson lives and breathes Tolkien, he makes the case why if you want to make a story like this go to the theatre, you get a fanboy to do it.

So the fact that he's on as an executive producer means even the most stubborn know they need his guidance here. I am relieved that might work out after all.

I was interested to see there will be two films. But the Hobbit was a large book, especially large for what was originally a story for Tolkien's grandchildren. It makes sense they would split it to have time to get it right. Now to consider where the cliffhanger might be placed; I am thinking the entry of Mirkwood, where Gandalf leaves them to cross that terrible forest alone, might be the place. More or less centrally placed in the book. Time will certainly tell.